1) Depreciation is reported in the following lines of the income statement:

MSEK

2017

2016

Production costs

-31

-32

Sales and administrative expenses

-1

–

Total

-32

-32

2) Write-downs are reported in the following line of the income statement:

MSEK

2017

2016

Production costs

-11

–

Total

-11

–

Goodwill impairment testing in cash generating units

The Peab Group balance sheet 2017-12-31 included total goodwill of SEK 1,820 million (1,759). The table below shows goodwill per group of cash generating units for which goodwill is tested for impairment.

MSEK

2017

2016

Construction

Construction Sweden

68

68

Construction Finland

63

61

Construction Norway

151

159

Civil Engineering

Civil Engineering Sweden

171

146

Industry

Business area level, when repurchased by Peab 2008

1,274

1,274

Industry Sweden

51

16

Project Development

Property Development Sweden

21

21

Housing Development Sweden

14

14

Housing Development Norway

7

–

Total

1,820

1,759

Goodwill write-downs

Group goodwill has not been written down in 2017 or in 2016. For the cash generating units where a calculation of the recovery value was made and no write-down need was identified, executive management has assessed that no feasible possible changes in important assumptions would result in a recovery value lower than the recognized value.

Method for calculating recovery value

The recovery value for all goodwill values has been derived by calculating the useful value for the cash generating units.The calculation model is based on a discount of forecasted future cash flows compared to the unit’s reported values. These future cash flows are based on 5 year forecasts produced by the management of the respective group of cash generating units. Goodwill impairment tests have an infinite time horizon and extrapolation of cash flow for the years after the forecast was calculated based on a growth rate from year 6 onwards of approximately 2 percent.

Important variables when calculating useful value

The following variables are important and common to all cash generating units in calculation of useful value:

Net sales: The business’ historical development, expected changes in the construction business cycle, general socioeconomic developments, investment plans of public and municipal customers, interest rate levels and local market conditions.

Working capital requirements: Individual case assessment of whether the working capital reflects the company’s needs or whether it should be adjusted for the forecast period. A reasonable or cautious assumption for future development is that it parallels net sales growth. A high level of internally developed projects may entail a greater need for working capital.

Investment needs: The company’s investment needs are assessed on the investments required to achieve the initially forecasted cash flow, i.e. not including expansion investments.

Tax burden: The tax rate in forecasts is based on Peab’s expected tax situation in Sweden, Norway and Finland with regards to tax rates, loss carry-forwards etc.

Discount rate: Forecasted cash flows and residual values are discounted to currentvalue applying a weighted average cost of capital (WACC). Interest rates on borrowed capital have been market adjusted to each country. The required return on equity is based on the Capital Asset Pricing Model. A weighted discount rate after tax has been used in calculating useful values. The discount rate after tax used on cash generating units in Sweden is on average 8.7 percent (7.8), in Norway 9.4 percent (10.2) and in Finland 9.2 percent (9.0) The corresponding pre-tax discount in Sweden was on average 8.8 percent (9.6), in Norway 9.4 percent (12.3) and in Finland 9.3 percent (11.4).

Intangible fixed assets, external purchase

Intangible fixed assets, internally developed

Parent company 2017, MSEK

Other intangible assets

Balanced development costs

Total

Opening acquisition value

–

–

–

Purchases

22

17

39

Closing accumulated acquisition value

22

17

39

Opening depreciation

–

–

–

Depreciation 1)

–

-1

-1

Closing accumulated depreciation

–

-1

-1

Closing recognized value

22

16

38

1) Depreciation is reported in the following line of the income statement:

Peab AB is a public company, Company ID 556061-4330. Domicile Båstad, Sweden.

All values are expressed in Swedish krona. Krona is abbreviated to SEK, thousands of krona to TSEK and millions of krona to MSEK. Numbers presented in parentheses refer to 2016 unless otherwise specified.

Data regarding markets and the competition are Peab’s own assessments, unless another source is specified. These assessments are based on the best and latest available facts from, among others, previously published material.